August home builder sentiment and sales/prices/starts survey results are in. Top themes: 1) Home price cuts along with other incentives are helping sales (for now). 2) Supply chain is healing as demand drops and builders quickly slow housing starts. Market commentary to follow…
#Austin builder: “A lot of spec inventory to work through. August was a very poor month for sales across the board. Cancellations spiked from July and buyers showed no sense of urgency.”
#Baltimore builder: “Jumbo loan rates below 5% are helping buyers move forward in that segment.”
#Boise builder: “Construction cycle time has improved over the last 30 days.”
#Charlotte builder: “Sales were fairly strong in August. Increased incentives to help with closing costs and a buy down rate appear to be helping.”
#Cleveland builder: “Build cycle times have been improving over the last 4 or 5 months. Appointments have completely dropped off and traffic is very sparse at the models.”
#Dallas builder: “The slowing of starts is helping front end (foundation/framing) issues. Build cycle time is down and will go down further as material becomes more available.”
#Harrisburg builder: “When mortgage rates dropped in early August we saw a big uptick in buyer activity. This aligned with a large incentive and price reduction rolled out at same time. Took a big hit on margin to generate sales.”
#Houston builder: “We have slowed starts significantly, as have other builders, and we are confident this will enable us to bring our build cycle times down. Slowing starts are providing some relief to labor disruptions.”
#Jacksonville builder: “Frame material and labor have stabilized. Garage door delivery times also more predictable.”
#KansasCity builder: “Most of our build cycle challenges are starting to ease. Subcontractors on the front end of the building process are starting to call and ask for work.”
#Louisville builder: “Build times are getting better. One of our biggest delays is getting through the municipal permitting process.”
#Ogden builder: “With reduced sales and moderation of starts, build time on the front end has dropped significantly.”
#OklahomaCity builder: “Builders are now fighting for the same customers and systematically reducing prices.”
#Philadelphia builder: “A slowdown in sales helped to relieve the pressure on labor and supply issues.”
#Phoenix builder: “Incentives continue to grow, with some communities pushing 20% in total discount packages. The positive is there’s light at the end of the tunnel for improving build cycle times. The negative is there won’t be customers on the other side of said tunnel.”
#RaleighDurham builder: “Largest schedule constraint is not having electrical power from our local public utility. We’ve built everything with generators over the last 24 months! We have closings held up on finished homes due to not having power.”
#RiversideSanBernardino builder: “The amount of material shortages experienced 6 months ago have started to dissipate, however the current shortage of electrical switch gear has added weeks to our schedule on every project.”
#Sacramento builder: “No urgency in buyers. Large public [builders] with significant spec inventory are winning more of the sales with very large incentives (discounts and closing costs).”
#Tampa builder: “Big spec builders are slashing prices on their inventory homes that will close in 2022. If interest rates get to 6.5% the waters will get very choppy.”
#WashingtonDC builder: “Starts have declined drastically. The new environment is going to cause trades to drop their costs significantly and we expect that to make its way through all of supply chain.”
#WestPalmBeach: “So far, we still haven’t seen what most of America is experiencing [slowing]. Anything under $450K is still selling well." THE END

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More from @RickPalaciosJr

Aug 15
Home price trends across 20 top housing markets. Pace of price increases moderating (left chart), which you can see in our underlying home price index flattening out or actually falling in a few markets (right chart). Start it off with #Atlanta.
#Austin home prices
#Boise home prices
Read 20 tweets
Aug 2
Apartment transaction market appears to be in price discovery phase. Bid/ask wider as highly leveraged buyers take a breather. Asset values down ~5% to 15% and cap rates up ~50 to 100 basis points based on earnings commentary last week...
Mid-America: “~40 bps change in cap rates last 2 to 3 months. Majority of fallout related to higher levered buyers pulling back & buyers with shorter-term time horizons pulling out of market. Assets not well located or inherent issue could see [cap rates off 75 to 100 bps].”
AvalonBay: “Last couple months there's been a shift in transaction market. Cap rates up 50 bps. Definitely deals not transacting, particularly if they were targeted more to highly levered buyers. In terms of overall asset values, maybe down 5% to 10%.”
Read 8 tweets
Jul 18
Home builder market share dynamics are worth paying attention to as housing demand softens. Couple builders known for resetting the market on price are now lion’s share in many geographies, not just Tampa (shown below).
National home builder market share concentration at the top has grown quite a bit in recent years.
Publicly traded home builders are now 42% of entire new home market, up from 23% in 2001. A lot of this is mergers and acquisitions, but definitely a different market share backdrop.
Read 4 tweets
Jul 11
June home builder sentiment and survey results are in. Top themes: 1) A lot more new home buyers cancelling. 2) Price cuts becoming fairly common. 3) Drop in demand finally cooling construction cost pressures (builder layoffs also happening). Market commentary to follow…
#Atlanta builder: “Someone turned out the lights on our sales in June!”
#Austin builder: “Sales have fallen off a cliff. We’re selling 1/3 of what we sold in March and April. Trades are more willing to negotiate pricing since market has adjusted significantly past 60 days.”
Read 22 tweets
Jun 8
May homebuilder survey results published last week. Top themes: 1) Builder metrics quickly deteriorating across the board. 2) Price cuts on standing ‘speculative’ inventory accelerating. 3) Buyer incentives are back. Market commentary to follow…
#Austin builder: “Some parts of town where finished homes are now taking a month to sell versus hours. Market is definitely correcting. Incentives are back and seeing some builders cutting prices on inventory.”
#Baltimore builder: “Customers now mentioning potential reduction in prices and/or increase in incentives.”
Read 23 tweets
May 20
Seeing ripple effects of rising rates reverberate across housing market. Starts with entry-level buyers (already slowing).
Move-up buyer also showing signs of slowing. Home equity rich helps offset 5%+ mortgage rate shock, but need a buyer to sell/move-up in market (often an entry-level buyer), that's now pulling back.
Luxury, second home, and vacation buyers also pulling back. Discretionary purchase and sensitive to overall investment portfolio/broader economic shifts (not great currently).
Read 4 tweets

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